It is safe to assume that everyone reading this article is familiar with the regular or Fiat money which is provided by the government and has become the center of everything, it has one or a number intricate Central Figures fighting like lions to preserve, deflate or inflate it’s value, but then the Cryptocurrency a strange item which some regarded having the same value as a video game money came around throwing everything important about the regular money out of window by making it De Centralized, this begs the question who or rather what decides it’s value.
While the fiat currencies like the dollar represents the units of account of national economics. In actuality they hold little to no value. The only reason the Fiat money holds any value is because people think that it does. Apart from this a dollar bill is no different from any other piece of paper in existence, this of course is hard for us take in as we have lived our lives revolving or at least effected by it. The value of any currency is the effect of a phenomenon called Network Effect eg. the social media handle is only important if an enough number of people are using it. We all have seen how Facebook took the world by storm with people spending so much time on their handles, while other competing websites lost their value and traction, similarly currency too only has value because there are people out there using it for transaction thus making the currency reliable enough to make people believe that it’s value won’t depreciate over time, thus convincing people to trade it for their services.
No currency in the world has any inherent value, it is our belief in the currency which gives other around us confidence to use it as a medium for transacting their services.
How Bitcoin Works
For an ignorant user Bitcoin works no different from any other form of money, however in reality every transaction ever made is registered in a public ledger distributed among the users as an application of Block Chain. The user can verify the transaction using this ledger.
Bitcoin Boon Or Bane??
Are we Invisible while using Bitcoin?
Bitcoin is designed to help users send and receive money online with privacy but it’s anonymity is far from what it is with cash. Though legal names and addresses are not required for the transaction, the transaction made is still listed in a public ledger for everyone to see.
Is Bitcoin Legal?
Most jurisdiction and legislations do not out law the use of Bitcoin however there are many jurisdiction that can severely punish you for dabbling with foreign currencies.
Why doesn’t the fact that literally anyone can mine Bitcoin lead to Inflation?
Mining of Bitcoin actually helps in the transaction of Bitcoin. While it does add more Bitcoin in the system the change is miniscule at best. Not to mention a cap at the maximum possible amount of Bitcoin was placed at the very inception of Bitcoin at a value of 21 Million. This may lead to some to think that the value of Bitcoin may spike due to this but a fail safe for this was made in the form of its high divisibility, as Bitcoin can be divided up to 8 decimal places.
Who Backs Bitcoin and Who determines it’s value?
Bitcoin has properties similar to money but in actuality it is not backed by any other precious metal or by a central authority. In reality Bitcoin is backed by Mathematics which for some is as good as anything else thus. Just as we discussed earlier it’s value is regulated by people who are ready to accept it as payment, thus it’s value is a simple calculation of simple supply and demand.
As a closing statement I would like to point that any form of currency is just another way for our society to exchange services and add value to one another we all must make sure to be morale in our conduct while using any form of currency crypto or otherwise.
I have but scratched the surface on the topic of Bitcoin and Cryptocurrency. Do checkout the official website of Bitcoin for much more knowledge on the subject and make sure to check the rules and regulations for the transaction as they might have changed in the time I wrote this blog and you reading it.